Bank charging foreclosure or prepayment fees on your loan? Know your rights
Updated 2026-10 · General information, not legal advice.
Whether a lender can charge you for closing a loan early depends on the type of loan. For floating-rate loans taken by individuals for non-business use, RBI rules do not allow such charges.
When to use this
- You were charged to close your loan early
- You were charged for a part-prepayment
- The lender refuses to issue a closure letter
Step by step
- 1
Check your loan type
Confirm whether the loan is floating or fixed rate, and whether you took it as an individual for personal use.
- 2
Read the sanction letter
Look at the prepayment clause. Fixed-rate or business loans can carry charges as per the contract.
- 3
Dispute in writing
If the charge is not allowed, write to the lender's grievance officer asking for a refund of the charge and a closure letter.
- 4
Escalate to the RBI Ombudsman
If the lender does not respond in 30 days, file free at cms.rbi.org.in.
Key facts
- Always get a loan closure letter and no-dues certificate
- Rules differ for fixed-rate and business loans
- Shikayat does not give financial advice
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Common questions
Can a bank charge for early closure of a home loan?
For floating-rate home loans taken by individuals, RBI rules do not permit prepayment charges.
What if the lender refuses to give a closure letter?
Write to its grievance officer and escalate to the RBI Ombudsman.